Just after the 2002 midterm elections, then-Treasury Secretary Paul O'Neill argued in a White House meeting against the huge tax cuts others in the George W. Bush administration wanted, on the grounds that they would increase the deficit. Vice President Dick Cheney cut him off: "Reagan proved deficits don't matter," he said, as Ron Suskind reported in his book The Price of Loyalty. "We won the midterms," Cheney continued. "This is our due."
So it was. They got their tax cuts and increased the deficit dramatically, all while claiming to be the party of "fiscal responsibility." And now we stand at another transition between a Democratic and Republican administration, which means that Republicans are preparing to do a 180-degree turn on their opinion about spending and deficits.
Here's how it works: When there's a Democrat in the White House, Republicans say the deficit is a positively existential threat to our nation and our children's future, and we simply must make brutal cuts to spending in order to bring it under control. But when there's a Republican in the White House, they say deficits are something to be concerned about, sure, but maybe at some later date, because right now we really need to cut taxes and boost military spending.
That's not to say that Republicans don't have some spending cuts planned, because they do, to things like food stamps and Medicaid. But that's not about saving money, it's ideological. Elsewhere they're looking forward to blowing up the deficit as high as they can.
Take, for instance, President-elect Donald Trump's tax proposal. It would cause an unprecedented increase in the deficit. Over 10 years it would decrease federal revenues by an astonishing $9.5 trillion, or nearly a trillion dollars a year, the Tax Policy Center says. And of course, the bulk of its benefits go to the wealthy. When you ask Republicans about the fiscal effects, they wave the question away by saying that when you cut taxes for the rich, there's such an explosion of economic growth that you get back most of that revenue, and what's left can be taken care of by eliminating "waste, fraud, and abuse" in federal spending.
We don't have to wonder whether their predictions are true, because we've already tested them. Just about everything in the Republican economic plan was tried during George W. Bush's presidency, when like today they controlled both the White House and Congress (for his first six years). Bush passed two massive tax cuts that showered benefits on investors, wealthy heirs, and anyone else with high incomes. He cut regulations on corporations, getting government off their tender and tired backs. And what happened?
There was, you may recall, no explosion of economic growth. In fact, growth in GDP, jobs, and wages was anemic throughout Bush's time in office, culminating in the most catastrophic economic crisis in 80 years. And the deficit? Well, in Bill Clinton's last year in office there was a surplus of $236 billion. By Bush's last year in office, the deficit was $458 billion, for a remarkable $694 billion net increase.
You can't blame the increased deficit solely on Bush's tax cuts, however. There was also his enormous spending initiatives, which were supported wholeheartedly by Republicans in Congress. None was bigger than the Iraq War, which is estimated to have cost at least $2 trillion and perhaps $4 trillion. At the time, when Bush was raising the alarm about Saddam Hussein's fearsome arsenal of weapons of mass destruction, only a few wimpy Democrats raised the question of how this new war would be paid for; Republicans just knew it needed to be done, deficits be damned.
They felt the same way when Bush proposed adding a prescription drug benefit to Medicare: Sounds good, let's not worry about paying for it. This is in stark contrast to the supposedly profligate Democrats, who bend over backwards to make sure that every new program they propose is paid for down to the last dime. So it was with the Affordable Care Act, which included new taxes and savings squeezed from Medicare to pay for the entire bill.
Republicans are also hoping to pass an infrastructure bill, which is something our roads, bridges, water and sewer systems, and electrical grid sorely need. We'll put aside for another day the problems with the particular kind of infrastructure plan they're considering, but it's important to remember that Barack Obama spent years begging them to consider a comprehensive infrastructure bill. They refused, citing the terrifying deficit.
But now everything's different: There's going to be a Republican in the White House, and so, as Reagan proved, deficits don't matter. It should be said that in many ways, deficits don't actually matter; we're fine running a deficit just as we always have been. And with interest rates at near zero, this is the best time to borrow more money to make critical investments in things like infrastructure.
But let's not pretend that the Republicans who will now be borrowing that money ever really cared about the deficit in the first place, as anything other than a tool they could use to justify hamstringing Democratic presidents and cutting programs they never liked anyway. In that sense, the deficit did matter a great deal to them. It's just not what they're willing to admit.